10 hrs ago
Mid-Cap Private Banks Outpace HDFC Bank Despite Steep Valuation Discounts
The article compares three smaller private banks with HDFC Bank.
These banks are Dhanlaxmi Bank, Karnataka Bank and Jammu & Kashmir Bank.
Their loans grew quickly during the June 2026 quarter.
Dhanlaxmi Bank and Karnataka Bank also reported strong profit growth.
Jammu & Kashmir Bank grew its loans quickly, but its profit fell because its lending margin narrowed and taxes rose.
The smaller banks focus on loans such as gold, small businesses and retail borrowing.
Their shares are valued much more cheaply than HDFC Bank’s shares.
However, their total loan books are much smaller.
The article says investors may want to watch these banks, while remembering that strong recent results do not guarantee future performance.
Dhanlaxmi Bank, Karnataka Bank and Jammu & Kashmir Bank trade 48% to 57% below HDFC Bank on price-to-book valuations.
Dhanlaxmi Bank’s advances rose 27.4%, while net profit more than doubled to Rs 24.9 crore in the June 2026 quarter.
Karnataka Bank reported 16.6% loan growth, a 3.2% net interest margin and 43.3% profit growth.
Jammu & Kashmir Bank’s advances grew 26.7%, but lower margins and higher taxes helped push profit down 12.4%.
The article says regional banks benefit from gold, SME and retail lending, but their loan books remain much smaller than HDFC Bank’s.
- Who
- Dhanlaxmi Bank, Karnataka Bank, Jammu & Kashmir Bank and HDFC Bank.
- What
- The article compares the banks’ growth, profitability, asset quality and price-to-book valuations.
- Where
- The banks operate in India, with regional operations highlighted for Dhanlaxmi Bank and Karnataka Bank.
- When
- The operating results relate mainly to the June 2026 quarter, the first quarter of FY27.
- Why
- The comparison examines whether faster-growing regional banks are undervalued relative to HDFC Bank.
Investment Case
Risks and Caveats
Growth
Investment Case
The three regional banks grew their loan books by double digits and, in some cases, faster than HDFC Bank.
Risks and Caveats
The comparison is based on smaller loan books, so strong percentage growth may not represent comparable absolute scale.
Valuation
Investment Case
The banks’ price-to-book ratios are 48% to 57% below HDFC Bank’s, potentially offering cheaper exposure to domestic credit growth.
Risks and Caveats
The article does not establish that the discount is unjustified or that the banks will achieve the expected future growth.
Operating performance
Investment Case
Gold, SME and retail lending supported strong growth, asset quality and profits at Dhanlaxmi Bank and Karnataka Bank.
Risks and Caveats
Jammu & Kashmir Bank’s profit declined as its net interest margin narrowed and its tax burden increased; Dhanlaxmi Bank’s NIM was not provided.
Key facts
- Banks covered
- Dhanlaxmi Bank, Karnataka Bank, Jammu & Kashmir Bank and HDFC Bank
- Valuation range
- The three mid-cap banks trade at 0.8 to 0.95 times standalone book value, versus 1.85 times for HDFC Bank.
- Valuation discount
- The mid-cap banks trade at a 48% to 57% discount to HDFC Bank on the cited price-to-book measure.
- Highest loan growth
- Dhanlaxmi Bank’s advances rose 27.4%; Jammu & Kashmir Bank’s rose 26.7%; Karnataka Bank’s rose 16.6%.
- Profit performance
- Dhanlaxmi Bank’s net profit rose 104%, Karnataka Bank’s rose 43.3%, and Jammu & Kashmir Bank’s fell 12.4%.
- Net non-performing assets
- The reported net NPA ratios were 0.47% for Dhanlaxmi Bank, 0.87% for Karnataka Bank, 0.6% for Jammu & Kashmir Bank and 0.41% for HDFC Bank.
- Return on equity
- Reported standalone ROE was 7.15% for Dhanlaxmi Bank, 10.4% for Karnataka Bank, 15.2% for Jammu & Kashmir Bank and 14% for HDFC Bank.
Sources
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